The company stated that they conducted an investigation, and discovered a flaw in how they were reporting signal strength to customers. Users were being told that iPhone 4, as well as all previous iPhones, were being told that they had higher signal strength than actually was being received by the phone.

The statement also noted that users who have noticed degradation in signal strength while holding iPhone 4, were likely in fringe signal areas where holding a cell phone can hurt signal reception. Apple concluded that users in these fringe areas were seeing incorrect signal strength data on-screen.

Apple will be switching to a new algorithm recently implemented by AT&T, that the carrier now suggests all devices on their network use to report signal strength.

However, this explanation is curious because Apple claims that this software flaw in signal strength algorithms dates back to the original iPhone, which would not explain why iPhone 4 owners are having new issues compared to older models.

Apple also tacitly admitted in the letter that the original iPhone would not be updated with the new signal strength algorithm; only iPhone 3G, 3GS, and 4 will be updated. Since the original iPhone taps out at iOS 3, it is consistent with Apple’s policy to only provide security updates for the most-recent discontinued operating system version, and has discontinued supplying bug fixes for iOS 3.

The letter also tacitly included that the upcoming iOS 4 update will not improve reception on the device, for the vast majority of users it will only correct the reporting of the signal. In addition, signal bars will be re-drawn so the smaller bars are easier to see at a glance.

Christopher Price is the Founding Editor of PhoneNews.com. Today, he leads the team building Console, Inc. - a new kind of Android™ device. He still likes to pontificate... a lot. You can visit his personal blog at ChristopherPrice.net.

I”m sooo calling shenanigans on this report by AT&T/Apple, there was a youtube video where a guy was holding a iPhone 4 with 5 bars and was talking to another to cell phone in front of the mic of the video being made.

He started to count and for the first 5 or so seconds everything sounded good, as soon as he grounded the antenna with his finger his voice started to cut off and it didn’t even matter the amount of bars he had at the time. Once he moved his pinky finger the call sounded crystal clear again.

It shouldn’t matter what your signal strength is reporting, shorting the antenna caused massive degrade of signal, so BS to AT&T and Apple!

This reminds me of back in the day when video cameras competed with terms that all the manufacturers used but really didn’t have a predefined standard method or value. The value for signal strength should be industry defined by the same SIG that develops the technology be it CDMA, GSM, iDen.